New tools of the central bank to control liquidity/determine the riyal ceiling for the growth of each bank’s balance sheet

According to the economic correspondent of Fars news agency, the control of the balance sheets of banks with the aim of controlling the growth of liquidity was a policy pursued by the Central Bank since the beginning of the 13th government.

In the first step and in the initial version, the limits of balance sheet growth for commercial banks in each month compared to the previous month were considered to be 2% and for specialized banks 2.5%, but this approach was criticized, including that in this method, differentiation There is no difference between a good and a bad bank, and an unhealthy commercial bank can grow its balance sheet as much as a healthy commercial bank.

This issue caused the Central Bank to correct this deficiency in August 1401. The amount of balance sheet growth for banks is based on the allowed limit of balance sheet growth for each bank, which is based on 7 bank health indicators, which include the credit institution rating score based on the Camels method (CAMELS), capital adequacy ratio, interbank market situation, overdraft situation, receivables situation Rial non-current, the status of compliance with anti-money laundering regulations, as well as the professional judgment of the status of the credit institution from the point of view of the inspection group within the framework of the relevant rules and regulations (observance of the interest rate of deposits and facilities, macro, related, investments and transparency).

With this method, the growth of banks’ balance sheets is no longer equal, and the range of growth of banks’ balance sheets was determined between 1.33% and 2.5%, as well as the monthly growth of Qarz al-Hasna banks’ balance sheets was 4.5%.

In the new directive that was approved by the central bank’s executive board in January, reforms have been implemented to control the money creation of banks.

* Controlling the left side of the balance sheet of banks with the priority of non-aligned banks

One of the most important changes of this directive is the control of the left side of the balance sheet in addition to the right side. In fact, until now, in order to control and limit the growth of the balance sheet, the central bank only controlled the bank’s assets (the balance of granted facilities, investment in shares, purchase of real estate, debt to the central bank), but in the new policy for the left The balance sheet of the bank, which is the north of the bank’s liabilities (current deposits, term deposits, debt to the central bank) will also be controlled.

* 5 banks were subject to the control of both the right and left sides of the balance sheet

Based on this instruction, the control of the left side (bank debts) is done next to the right side, at the discretion of the central bank and with the priority of non-performing banks. According to the definition of the directive, Natraz Bank means a bank that has both overdrawn from the central bank and recorded a loss in its balance sheet.

According to Fars reporter’s follow-up from the central bank, currently 5 non-performing banks will be subject to the control of the right and left side of the balance sheet.

* Determining the riyal ceiling for the growth of each bank’s balance sheet

Also, in the new program of the Central Bank to control the balance sheets of the banks, the limits of liquidity growth considered by the Central Bank in the amount of Riyals are calculated based on the financial standard indicators that were previously included in the text of the instructions in the amendment of August this year, monthly and annual limits for each bank. The Riyal growth of the balance sheet is determined.

For example, the assets subject to the growth of a bank’s balance sheet is 25%. This 25% is equivalent to 20 thousand billion tomans. Therefore, this bank will be allowed to grow its balance sheet by 1666 billion tomans every month.

* Exclusion of government and central bank Islamic financial bonds from including balance sheet growth

According to Fars report, among other amendments of this directive are the assets that are excluded from the control of the balance sheet.

In the first version of the guidelines for controlling the amount of balance sheets of banks, government Islamic treasury documents were excluded from the scope of controlling the amount of balance sheets, but in the amendment of the guidelines for Islamic financial securities of the government and the central bank, exceptions have been specified.

In fact, in this format, the sale of public auction bonds and the sale of bonds by the central bank to banks is not taken into account in the control circle of some growth of the bank’s balance sheet.

Also, previously, only bank deposits with the central bank were out of the balance sheet growth limits, but in the new amendment, bank deposits with other banks and credit institutions can also be excluded from the balance sheet growth limits (at the discretion of the deputy head of the central bank).

In the first version of this instruction, the increase in the credit institution’s assets due to events such as currency exchange rate, revaluation of fixed assets, and capital increase from the shareholders’ cash contribution was excluded from the circle of balance sheet growth limits, but in the new version, this exclusion is subject to the approval of the deputy Central bank supervision.

* The deadline for uploading information was reduced from 15 days to 7 days

In the previous directive, banks and credit institutions had a deadline of 15 days after the end of each month to upload balance sheet information and assets and liabilities in the central bank system, but in the new version, this deadline has been reduced to 7 days.

In the initial instructions, if the bank had three consecutive months of growth exceeding the limits set in the balance sheet, it would be subject to a fine of increasing the legal deposit rate equal to the percentage of the violation, and of course up to a limit of 13%, which was later increased with the permission of the Money and Credit Council. increased by 15 percent.

* Increasing the legal deposit by crossing the limits of balance sheet growth every month

But in the new amendment, if a bank violates the limits of balance sheet growth in just one month, it will be subject to an increase in the legal deposit “in the amount” of the monthly violation. In other words, if a bank has 1000 billion tomans more than the set limits in one month of balance sheet growth, it will be subject to the same amount (up to 15%) of the legal deposit increase fine.

In the previous version, if the bank returned to the growth limits of the balance sheet and respected the set limits, it would take three months for the legal deposit rate to return to the previous level, but in the new version, if the growth of the bank balance sheet returns to the set limits, it will take three months. After one month, the legal deposit rate will decrease to the previous level.

* Restrictions on payment and creation of large facilities and obligations with three months of violation of balance sheet growth ceiling

In the initial version, it was stated that if a credit institution violates the limits set in the quantitative control regulations, the CEO and board members of the offending bank would be introduced to the banks’ disciplinary board, but in the new version, the rules in this section have been changed and It has gained small dimensions.

In the new directive, if a bank or credit institution violates the growth limits of balance sheet control for three months, the Central Bank’s Vice President of New Technologies will notify the Central Bank’s Vice President of Supervision in the departments of payment of facilities and the creation of large and related facilities and obligations in the system. Samat creates limitations.

* Introducing the board of directors and the CEO to the disciplinary board with 6 months of violation of balance sheet growth limits

However, if the violation of the balance sheet growth limit continues for 6 months, the CEO and members of the board of directors of the offending bank will be introduced to the disciplinary board of the banks.

The end of the message/T 670